Qantas tactics led to current tailspin

The pitched war between Qantas and Virgin now being waged across our skies has its genesis on two levels: personal and commercial, writes Ian Verrender.

As ringside spectacles go, there's been nothing like it for years.

The bruising stoush between Qantas and upstart newbie, Virgin Australia, has plunged Australian commercial aviation into crisis, leaving investors smarting and thousands of Australians out of work.

Business is supposed to be about logic. Economics courses hammer home the concept of rational behaviour. The management texts are brimming with scientific methods to maximise returns.

Occasionally, though, logic is thrown to the wind as the primal Darwinian urges that shape human behaviour and the natural world take hold in a boardroom fight to the death, where ego reigns supreme regardless of consequences.

The pitched war now being waged across our skies has its genesis on two levels; personal and commercial. To quote the NRL's State of Origin promotional guff: this is Mate versus Mate, State versus State.

The increasingly isolated and besieged Qantas boss, Alan Joyce, and Virgin Australia's John Borghetti once were colleagues, working together for the betterment of the Flying Kangaroo.

But any semblance of cooperation was abandoned when Joyce, who had cut his teeth at budget operator Aer Lingus and showed adept skill with a scalpel at Jetstar, trumped Borghetti for the job to steer Qantas through a post-financial crisis world.

Borghetti walked across the tarmac to Virgin with a steely determination to prove to the Qantas board the extent of the mistake it had made.

He took Virgin upscale and quickly formed links with Qantas arch rivals Singapore Airlines, Air New Zealand and the new and increasingly powerful Middle Eastern carrier Etihad, rather than squander a fortune building his own international network.

In Singapore, he found a kindred spirit. The airline had long harboured a sense of animus towards Qantas ever since the smooth talking Geoff Dixon convinced the Howard government to block Singapore's access to its then lucrative trans-Pacific route.

And it was enraged when Joyce foolishly decided to use Singapore as the first step in his flawed Asian expansion strategy, choosing the island state as the headquarters for Jetstar Asia.

Singapore responded by despatching its own cut price outfit, Tigerair, into the Australian domestic market.

While it generally is acknowledged that Borghetti has run rings around Joyce, it's worth remembering that Virgin Australia's financial position is delicate to say the least.

It is one of the most indebted carriers in the world and survives only on the goodwill of its major investors, the three foreign airlines, and, to a lesser extent, Sir Richard Branson. The $83 million loss it clocked up on Friday is the latest in a long line of disappointing earnings performances.

On its own, there is no way it would be capable of throwing the volume of empty and uneconomic seats into the air that it has done.

But Joyce and the Qantas board, where directors with direct aviation experience are thin on the ground, have made a fundamental error.

Rather than allow Virgin to clock up losses and instead concentrate on making a profit, they took the bait, vowing to never concede the title of Australia's largest domestic carrier. It "drew a line in the sand" at 65 per cent market share and matched Virgin's irrational business strategy.

Qantas has thrown an extra 7.1 million seats into the air, more than triple that of its rival's expansion. And there simply hasn't been enough demand to soak up that extra supply. As a result, domestic prices have crashed and many planes fly half full.

You don't need to be Einstein or have an MBA to realise that if you continue selling your product for less than it costs, then at some stage you'll end up in trouble.

Qantas now is in serious trouble. If it is to survive, it will need to immediately focus on earnings rather than market share.

Sacking thousands of workers and selling off the assets may plaster over the wounds, but it is hardly a long-term strategy for recovery.

If it truly believed Virgin was engaged in predatory pricing – deliberately selling seats at uneconomic prices – it should have launched legal action or complained to the competition regulator almost three years ago when the battle really began.

By going tit for tat, and by boasting that for every extra seat Virgin put into the sky, it would put up two, Joyce and the board have undermined their own complaint and shredded what little credibility they had. It is they who could be accused of dumping uneconomic capacity into the skies.

Adding to the insult, Air New Zealand on Thursday announced a 30 per cent lift in half-year earnings to a record, explaining that it cut back on capacity and increased profits.

Old aviation hands reckon Australia is only big enough for one-and-a-half airlines. That is evidenced by the graveyard of second tier airlines led by the once-great Ansett.

For Qantas to avoid such a fate, it needs to compete on a rational basis. That will involve difficult and even unpalatable choices for the company, the public and the federal government. Greater foreign ownership would be a better alternative to collapse.

Joyce, meanwhile, reckons the board is right behind him. Shareholders may take him at his word at the next annual meeting.

Ian Verrender is the ABC's business editor. View his full profile here.

Comments (160)

Gordon:

03 Mar 2014 11:01:53am

Australia IS only big enough for one and a half airlines. If Qantas had simply allowed Virgin to use its overseas backer's cash to grow unopposed guess who'd be the half.

I don't quite understand what alternative Ian is proposing: either Q & V compete for passengers or they collude on pricing like the old two-airline days of carbon copy schedules and bloated prices. "Old aviation hands" (ie customers) remember those days too.

Paul01:

03 Mar 2014 11:53:41am

Yes and no Gordon,

There is more too it than simply putting planes in the air.

Brand loyalty, high quality service, targeting high capacity destinations etc also go into the mix.

It appears that blues from more than 5 years ago, schoolboy rivalries and internal politics within the upper echelons of Qantas have led to this ridiculous contest where the losers are Australian workers, Australian shareholders and the Australian taxpayer.

The CEO and Board of Qantas have failed miserably at their job and should be sacked immediately.

Go to work tomorrow and see what your boss does if you cost him money.

Peter the Lawyer:

LeftRightOut:

03 Mar 2014 12:56:34pm

And vice versa Peter

However without a pilot a plane is useless.

As per previous attempts to get competition into Australian skies, QANTAS has gone all out to squash any opposition. This time the opposition was better positioned and able to sustain the losses for longer than QANTAS could afford.

Additionally, QANTAS has not done itself any favours in recent years by allowing its fleet to faulter and make the news regularly for in-flight issues. Planes grounded or re-routed due to mechanical problems might persuade people to change airline. Short cuts in maintenance is often a recipe for disaster - just ask Cootes.

Nigel:

JohnC:

03 Mar 2014 3:44:24pm

@Ben the lawyer:Sure you could register a company that has no workers and it could exist at least in name only. Only problem is that very few companies produce any serious revenue and profit without manpower. There are exceptions of course, investment companies, one man band companies, trust companies set up for taxation reduction purposes etc, but these are in the minority and their contribution to GDP is largely insignificant. Trying to wedge the correspondent on a technicality Ben?

enno:

03 Mar 2014 10:50:33pm

Actually, a large majority of all companies created n Australia employ no one and exist for avoidance of tax and other liabillities. There exst less than one million businesses in Australia, and that includes self-employed tradies and contractors. There is almost a billion companies. They are running out of numbers for them.

taxedorf:

03 Mar 2014 4:44:52pm

lawyers exist because of crims.... crims exist because of lawyers. its similar . a business employs and that makes the business sucessful poor management and the business suffers. poor workers and the business suffers. most adults seem to understand the relationship between the two parties.

HPH:

03 Mar 2014 1:59:30pm

Technically you are correct Emess but what he means is that the Companies exist for their shareholders - bottom line is 'The Money' - more shareholder dividend at the expense of the workers, society and the environment. We are living in a dog-eat-dog world because of people such as peter.

If you are old enough to remember the night of December 2, 1984, a pesticide plant in Bhopal, India leaked methyl isocynate gas and other chemicals creating a dense toxic cloud over the region and killing more than 8,000 people in just the first few days, mainly from cardiac and respiratory arrest. More than 40 tons of methyl isocyante (MIC) gas created a dense cloud over a resident population of more than half a million people. More than 20,000 people still live in the vicinity of the factory and are exposed to toxic chemicals through groundwater and soil contamination. A whole new generation continues to get sick, from cancer and birth defects to everyday impacts of aches and pains, rashes, fevers, eruptions of boils, headaches, nausea, lack of appetite, dizziness, and constant exhaustion.

The chemical factory responsible for this disaster, Union Carbide, which negotiated a settlement with the Indian Government in 1989 for $470 million - a total of only $370 to $533 per victim - a sum too small to pay for most medical bills. In 1987, a Bhopal District Court charged Union Carbide officials, including then CEO Warren Anderson, with culpable homicide, grievous assault and other serious offences. In 1992, a warrant was issued for Anderson's arrest.

But justice has eluded the people of Bhopal for more many decades. Dow, since its merger with Union Carbide, refuses to assume these liabilities in India - or clean up the toxic poisons left behind.

John:

03 Mar 2014 9:39:29pm

HPH, you really ought to be more careful before you throw allegations like that around.

Union Carbide conducted an enquiry into the incident and concluded that there was nothing wrong with the equipment or the installation. It found that the cause of the gas leak was water entering the system.

Employees claimed that this was a technical fault, but Union Carbide found no defects. It therefore commissioned an engineering audit by an external engineering firm. That audit found that the water had been deliberately placed into the system as an act of sabotage by an employee who removed the metering and stop-cock control and connected the pipeline direct to the water supply.

This was hotly disputed, so both Union Carbide and the engineering consultants handed the matter over to another firm of consulting engineers. That third examination confirmed the act of sabotage, and further reported that they had exhaustively checked the claim of water entering the pipeline by back-flow, and found that this situation could not be replicated.

At this time, some thirty years later, it is unlikely that the blame can be attached to any specific person or persons, or proved to have been the fault of the Company. Your allegations must therefore be seen as simply that - allegations.

Jack66:

Lozza:

04 Mar 2014 8:09:04am

Seriously, many companies have failed because the struggled to keep employees, borrowed to pay wages, many small businesses see the owners in bankruptcy as they borrow against home to pay wages.businesses do not exist without proprietors prepared to accept risk, they employ capital, equipment and workers to generate income to sustain all of them. Any of those components can contribute to failures.That is from twenty plus years in insolvency work. The internet shows us that you can use centralised workforces to operate in worldwide markets, The cloud allows major increases in IT without employment 1 more IT person in the company.It is the productivity (input/output) of Capital, equipment and workers that now drive things . management and workers need to get that in their heads , no sustainable earnings = no jobs.Better that you fly Qantas than join the commentators , a much more direct and less costly assistance.

Bush Dweller:

04 Mar 2014 9:57:45am

emess :No workers, no company.You neglected to mention Family Trusts.Most are companies.Have no employees as such. Many contractors/consultants, Accountants, financial advisors and lawyers.Best Tax avoidance scheme, established solely for the high income wealthy.

Mike:

03 Mar 2014 11:57:31am

I don't buy that. Sydney - Melbourne is the 4th busiest air route in the world. It's busier than New York to Chicago which is operated by 9 airlines. The problem is Qantas has set an arbitrary target of 65% of the market. In the USA it would be illegal for any company to hold that much market share.

Gordon:

03 Mar 2014 3:17:46pm

it might be the fourth busiest route, but all the others between them add up to one or two more busy routes. None of those 9 US airlines you mention is making a profit either; the US airline industry has basically been on life-support since 9/11.

One big guy and one to keep the big guy honest - that's what we need and basically it's what we have. If they played nice and agreed to go 50:50 in the sandpit it might be better for them but less nice for ticket-buyers who would then whinge about collusion & high fares.

RC:

03 Mar 2014 1:40:08pm

The moral of the story is - Sack heaps of loyal workers and gain Government funding.That Qantas has made billions of dollars worth of profits over the years on the backs of its workforce means naught.That its investors have not put to one side a "futures" contingency fund means that their greed fortells their own doom.That GM and countless other conglomerates also have or are doing the same thing also shows the same root cause of their future demise, too. If their greed precludes commonsense then the mugs here are the investors.As always, the sacrificial lambs are the loyal workforce.

Fletch:

03 Mar 2014 11:05:51am

The only way to save Qantas is to sack Alan Joyce. He has a long history of very poor business decisions that have contributed to or caused the near or actual collapse of two other airlines (Aer Lingus and Ansett) and now he is doing the same to Qantas. The unnecessary grounding of the airline was the final straw for me and I have given Joyce a vote of no confidence with my wallet. I have not flown Qantas since and will not fly Qantas again until he is gone.

Peter the Lawyer:

03 Mar 2014 12:15:41pm

I agree Jillene. The problem here is that most of our fellow commenters come at things from the perspective of the average wage earner. They don't really know what a CEO does or how businesses actually work. Most of them seem to think that enterprises exist to give work to their employees.

I blame our education system. it seems geared to make people ignorant or indoctinated into thinking that life should comprise of the government doing everything for you whilst you 'earn' a wage at the same time railing at the 'boss' as some inhuman, greedy villain.

Peter the Lawyer:

03 Mar 2014 2:16:52pm

Of course an airline can't exist without employees, but those employees' jobs are not ther reason the enterprise exists. The enterprise exists because those who own it want to earn a profit. Engaging employees is a by-product of that.

An enterprise of course should treat its employees well, as this will encourage them to work hard, take pride in the business thereby increase trunover. However, that does not mean that an enterprise should be run as a benevolent society for its workers. Where that occurs the workers will cease to do a good job and start to think of their employment more as an entitlement.

Jack66:

emess:

03 Mar 2014 1:09:46pm

And most failing businesses have, as core factors for those failures, a woeful inability to interact with their workforce as human beings, and CEOs who lead those companies off into disaster despite the best efforts of workers to save the company.

Alfie:

03 Mar 2014 3:24:03pm

So it is the employers fault for having a "woeful inability to interact with their workforce". That is just BS - it takes two to tango. Most of the large businesses who are currently under financial stress in Australia have a highly unionised workforce with a track record of union instigated conflict.

Dazonthecoast:

I previously worked for a large telecommunications company, no not Telstra, the other one, for nearly 20 years.

When first opened it had a high level of efficiency, customer satisfaction, employee satisfaction and was quite profitable.

Over the years successive senior managers changed conditions and treatment of the workforce to "increase profitability". This was done by constantly blaming the workers for all the ills, even though they were enacting the policies and strategies of the senior managers.

It was and remains still one of the least unionised companies in the country so please do not beat that drum.

One feature of successful companies is to engage employees and listen to their feedback and advice. This originally was done via a yearly survey. As things deteriorated the concensus among the senior managers was that the staff were whingers and needed reeducation. When this did not change the feedback they ceased the surveys so the bad news ceased. All better, pass the champagne.

I would counter a major part of this countries woes lies with the quality of management we are saddled with, with a vast majority being imports such as Joyce, Blount, Russell, Kloppers et al.

Kali:

So Peter, do CEOs have some sort of divine right of kings? They are infused with skill and wisdom when they ascend the throne of the CEO, and they can do no wrong?

It is not the "average wage earner" who is petitioning the Government to do something about Qantas, its the CEO Alan Joyce.

Mr Joyce and his Board has had all the power they need to successfully run the company (it been going pretty well for most of the last 90 years), and I think it is their fault that it has been run into the ground.

You can blame the cost of fuel, the opposition, the unions, the weather, all the other airline, even the education system, but in the end, Mr Joyce has been paid millions of dollars to run a profitable airline and after 5 years, her has stuffed it up.

I can't see why you would hang onto such a liability, other than for some kind of ideological reason.

Hubert:

In any event, given that a very very small percentage of the population are CEOs, or have intimate knowedge of the work a CEO does, this should not preclude others from commenting should it?

I agree with you on the education system, at least to an extent. I believe we are following the US cultural trend of the "dumbing down" of our population. Perhaps education should be given more funding? As for the expectation that government will do everything for you, perhaps years of middle class welfare has helped foster such expectations?

the bolter:

03 Mar 2014 5:00:55pm

yes I would agree that the sense of entitlement is partly constructed by the private school system of elites who disengage with the wider mainstream society and in effect attempt to perpetuate a false sense of their own entitlement. Coupled with this is the problem of the false sense of entitlement that parents give to their children who then disregard what a school or teacher expects are good behaviour or good attitudes towards others. The dumbing down of the education system has come from parents , politicians and arm chair accademia who are so far removed from the reality of a classroom.

BB:

03 Mar 2014 6:20:14pm

"Don't ask what my country can do for me , ask what can I do for my country". I may have that saying wrong but I think Peter there are too many who want want want for giving less less less.And the boss is always an A..hole just because he is the boss.

Bush Dweller:

04 Mar 2014 10:40:23am

BB :Agreed. Seems we now have a society made up of multiple us and thems.Yes, there are many of the private school brigade who have an undeserved sense of entitlement.Conversely we have many of the welfare brigade who think the government owes them a living in their refusal to contribute.In both instances, not a majority.Recent news indicates that ALL government subsidised industries (motor vehicle in particular) give generous benefits to production line workers $55 to $70 grand, plus add ons (overtime, penalty rates).Conversely we have AIN`s, caring for our aged on $40 grand.Corporate executives on millions.And now we are commenting on the trials of an airline, I am awaiting a comment on Abbotts strategy of releasing the airlines from their carbon tax commitments. Will save Qantas >$100 million per year, Virgin>$45 million per year and Rex $2 million. A tax a majority of international airlines are exempt from.No doubt, Joyce is incompetent, as is his board. That an international airline wants to compete with Rex on rural air services shows what a bully organisation they are. Remember Impulse plus 2 others they forced out of business by Qantas`s business model. Let alone Jetstar into Asia so Qantas could control 2 International airlines.

DaveS:

03 Mar 2014 12:50:49pm

Gee Jilleene , Id hate to see what you would sack someone for if you don't think the sacking of Mr Joyce would send the share price up and satisfy stakeholders.This guy has flown the airline like it was his own plaything and that the Govt and people of Australia WONT let it collapse.Then again what have I done?

aGuy:

03 Mar 2014 4:03:24pm

I would just like the super of board members to be paid solely reflective of share price.

If the company is going well due to sensible long term decisions, they have nothing to fear. If the board is not convinced the company is heading in the right, sustainable direction, they should get out quickly and earn their superannuation elsewhere.

The idea for bonuses for something like laying off staff or achieving a yearly profit is shortsighted and proven through numerous institutions to actually cause a lower performance for the majority of people. Financial incentives only improve labor for manual (no creativity) tasks such as picking fruit.

Jilleene:

Jazzy:

03 Mar 2014 1:50:11pm

Joyce and the entire board need to go. 80% drop in market capitalisation, keeping old & expensive aircraft flying, engaging on a pitched battle to eliminate a rival airline, a poorly planned push in to Asia, trying to belt the unions by enraging customers. The list goes on and on. Why has the rationalisation and restructuring of the business taken almost 5 years? Bugger all to do with the unions or the workers. This falls completely at the feet of the Board. Anyone who sticks up for the Qantas board is a mug. The comparison to Ansett is apt. There are multiple issues that could collectively bring Qantas to it's knees. Joyce will hang around for as long as possible. Why wouldn't he? If the reports of his salary are true, then he will fight tooth and nail to keep his $8k a day. Time for the shareholders to revolt. They deserve better.

Rob:

03 Mar 2014 11:08:47am

Excellent article Ian-it strips away all the b/s and gives truth to the old adage- 'you cannot buy sales".

Joyce and the Board lost sight of of what Qantas was and is about a long time ago. They continued the smooth talking Dixon in trying to convert Qantas into some sort of 'financial instrument" where the objective was to increase the share price-more by spin and corporate moves rather than by providing an exclellent service. The share buy back which cost it over $100 million was one typical example.Qantas got to where itwas-one of the world's best airlines by providing a good and safe service. People trusted it-and so did its staff.Once it became a corporate animal focused on the ego of its board and senior management it did not give a hoot for it customers or its staff-it lost that trust. It was downhill from then on.

The only thing which will save it is a Government partial take over- a debt guarantee and some equity-relaxing of the foreign ownership rules-sacking of the whole board and most of its senior management- employee equity- the selling off of Jetstar and most of Qantas's 137 subsidiaries and a return to the sanity of basics.

Tax Me:

03 Mar 2014 12:39:56pm

Well said Rob. Dixon, Joyce and the management team have been the thorn in the side for flight crews and on ground staff. I often read comments by people exclaiming how rude, or how little QA crew smile. If only those same people knew half the crap they have to put up with from management. Crew are there to provide the flying public with a service - not for their hair or jewellery to be scrutinised within an inch of its life! My wife and many of our friends who once had so much pride in QA now just treat their work as "just a job." The "spirit of Australia" is rapidly disappearing.

cdragon:

03 Mar 2014 4:21:10pm

I've just flown 2 long-haul flights with Qantas and have to say the staff were excellent. Despite having "no information at all about our future" (quoting one 25-year cabin staff member), they were unfailingly pleasant and helpful. We asked them what was happening to them - they did not initiate the conversation. We were told that an information line was set up but after trying for half an hour to access it without success, the staff member gave up, finding out later that the time published that the line was available was incorrect and that it was an hour later. The Qantas banners in the airport say a lot about the management focus: "It's about the trained baristas we have in our lounges." What???? I care about safety and whether my flight is still flying for my flight home - not cups of coffee in a lounge I can't access. Qantas customer staff are real - it's the management (CEO and board) who need reality checks.

lazarus:

John:

Some airlines, those based in Middle Eastern countries mainly, not only do not have taxes and charges on fuel but they actually receive substantial fuel subsidies.

And if we're taking about a tax that's helping to cripple the aviation industry, we should start here:

"Mr Borghetti said he had no problem with the government repealing the Qantas Sale Act, to allow the rival airline to take on majority foreign ownership. But the best assistance the government and the Opposition can provide is the removal of the carbon tax, which has cost this industry hundreds of millions of dollars,? he said.

Peter of Melbourne:

03 Mar 2014 12:37:39pm

In 2008 Qantas made a profit of $970m, in 2012 the airline made a loss of close to $250m.

Passenger numbers increased by a net amount of around 10m in that interval and staffing remained stagnant at aound 33.5k. However the Qantas group have purchased, not leased like the majority of airlines, 90 extra airframes.

Bad management decisions are the major factor in Qantas's woes and as a now private company with the investors understanding all of terms at privatisation it is not the Australian taxpayers role to bail them out.

Peter the Lawyer:

03 Mar 2014 2:28:31pm

Cap ex would not normally be shown in the P&L of a company, would it? Wouldn't it normally be in the balance sheet of the company? If so it would thus be something that shows up in the profit calculation. In any case, I suppose that the planes were finacned and paid off with the interest being a tax deduction.

CO2 tax, fuel and wages costs are the largets revenue expenses.

It would seem that qantas revenue hasn't risen sufficiently to cover these costs. The domestic division does well, but the international division is really sufferring throuhg not being able to compete on price with other carriers.

MDG:

03 Mar 2014 6:14:36pm

Qantas International's woes are nothing to do with the carbon price, because the price doesn't apply to international flights. The problems are all coming from elsewhere and lead you to ask why Qantas is failing when Air NZ - which is even smaller and further away from all of the major markets besides the Americas and which is also based in a country which prices carbon - is posting big profits.

lazarus:

John:

03 Mar 2014 3:20:21pm

That's wrong, Lazarus.

"The European Union's executive branch has proposed taxing airlines for emissions made while crossing European airspace, revising a controversial plan the EU had to back down from last year. Under the new European Commission proposal, airlines using EU airspace could be subject to a tax for air-polluting carbon emissions on the portion of a flight that crosses the European Economic Area (EEA)".The Wall Street Journal, 17th October, 2013.

Please note that the EU "has proposed taxing airlines" and the airlines "could be subject to a tax".

It's all hypothetical and is simply a re-hash of a plan put up by the AGW extremists a couple of years ago from which they had to back down.

Skeptic:

03 Mar 2014 2:18:25pm

The carbon tax was *never* a factor affecting the profitability of otherwise of Qantas or any other airline. This is simply a convenient lie pedaled by idiot politicians. Airlines avoid it simply by passing any extra costs on to consumers, just as they did with administrative costs associated with the GST. The Gillard government was lauded by other nations for introducing this tax. Other countries are planning to introduce it over the next few years. It's the tax of the future!

John:

03 Mar 2014 3:23:44pm

Of course it has an effect on the profitability of the airlines, Sceptic.

Salaries and wages have an effect; maintenance costs have an effect; financial costs have an effect. And the carbon tax has an effect. All those costs are passed on to the consumer in one way or another.

The fact that none of those imposts is sufficient in itself to turn a loss into a profit does not mean that there was no effect.

Wave 2me:

04 Mar 2014 8:08:41am

If every company is paying the tax, then it is a level playing field and should not be a huge factor.

Its only taxes and costs which one airline is subject to, that another is not that should have an effect. This causes one airline to have a cost they cannot recover because there competitors do not pay it.

If for example wages of one airline are much higher, or they have many more staff, or they are subject to a tax which no other airline has, then they are at a disadvantage.

So no, the Carbon Tax should not be big factor.

Over capacity is, more seats to sell than there are bums to sit on them.

Over staffed is a problem.

Poor relationship between Union and the company, causing destabilising conflicts. The rolling stoppages culminating in the fleet being grounded for example.

The list of problems when a fight for market share breaks out is huge, and can cause problems in any industry, but one with a cost base as big as an airline it can be fatal.

Bush Dweller:

04 Mar 2014 11:06:37am

Skeptic :"The carbon tax was never a factor etc etc . . ".So are you saying that Qantas >$110 million, Virgin >$45 million and Rex >$2 million, carbon tax liability has no effect on profitability.You must have a PhD in economics.Which other countries ex Europe with its subsidised carbon tax of $6 bucks, as opposed to our $25 bucks is planning to introduce a carbon tax.Do you know the difference between "planning" and actually doing. Because "they said" means "jack poop". Do you have any insight into when these other countries intend to implement their "alleged plan".Certainly not USA, China, Indonesia, Brazil, India, Japan or Korea. Who are these "other countries". Lots of emissions among that dastardly 7. Who cares whether other countries lauded Gillard whilst they do not follow her stupid, economy destroying example.

Leftnut:

03 Mar 2014 4:57:51pm

"Maybe the Oz market for airlines - like for cars - is just too hard".Not really just too much price cutting to gain market share.The airlines make a fortune in Western Australia milking the mining game,a one way ticket for the 600km Perth to Kalgoorlie flight by Virgin costs $210,the 1200km flight to Karratha is $237,all these flights will normally be full to capacity every day of the week.On the other hand I can get a Virgin ticket for the 2700 km to Melbourne on a half full plane for $179.If distance,wages, fuel and airport charges are such a critical factor to airlines costs the price of a flight to Melbourne or Melbourne to Sydney should be twice as much,no its all about market share, they might as well pull a ticket price out of a hat they have no relevance to cost.

Dove:

Hudson Godfrey:

03 Mar 2014 11:22:26am

Its pretty simple really. If Qantas need or want public support in hauling them out of the hole that they've dug for themselves then the least that they could do is stop digging. We're not as a community in the least behind the icon of our skies going offshore, but we think something has to change for the investment in keeping it to be worthwhile. So basically Joyce and his board have to go and new thinking needs to be brought to bear. If Qantas were doing only exactly what virgin are head to head with the kangaroo on the tail and not Jetstar then they'd have enough of an advantage in that brand loyalty to change the very few dollars more they need to succeed as an Australian based carrier.

Bush Dweller:

anote:

03 Mar 2014 11:42:52am

At least Abbott was right in this instance in that it would be wrong for the government to just support one private airline with a debt guarantee. I am dubious that the 49% foreign ownership rule is really a cause of the problem but it does not really serve much of a purpose anyway and should not be there. Legally there was nothing wrong with selling Qantas with those conditions and the owners are in no position to complain. However, but it does not make much sense commercially so it should be removed.

If the government wants control of an airline that competes privately it needs ownership. There is argument for government ownership but then it should not have sold Qantas in the first place.

Like Telstra but maybe not quite as much, Qantas was a virtual monopoly forced into competing privately and was going to lose out to some degree. Mismanagement made it much worse. There is nothing special about Qantas now except for the overly nostalgic. Now it is just a dog fight.

noirmoi:

Major point: nostalgia, has and is continuing to influence this discussion disproportionately.

The history of Qantas has us all in raptures, and the nostalgic calling Oz home campaign inflamed our collective desire for the flying kangaroo to be maintained as the Oz icon of capability.

Ansett was another Oz fav, but as I recall, majority ownership went to the kiwi airline (now profitable and internationally aligned with Virgin) and which exploited and stripped Ansett of vast amounts of its assets, resulting in Ansett's collapse.

Where DO we get this notion that taxpayers can bail out inefficient companies? The inefficiencies MUST be of the CEO and board's making, yet the shareholders appear to be under some spell by allowing remunerative packages which can hardly be said th reflect the performances of the members of the elite/executive.

If Qantas goes, it can only be because the management has failed to manage. So Be It.

William Smith:

03 Mar 2014 11:45:07am

Qantas should have never been privatised. The Australian public has always been against the privatisation agenda pushed by our political elite.

Now that Qantas is being threatened by competition from publicly-owned airlines, I'd be interested in hearing the views of the person most responsible for privatising Qantas. That would be Paul Keating, a slave to defunct economic just-so stories if there ever was one.

Peter the Lawyer:

03 Mar 2014 12:28:41pm

I can see it now. A government owned Qantas with lots of rickety old planes, staff that don't care and high fares. The staff would be happy of course because they would have guranteeed jobs for life and high pay. Yet we the customers would pay through the nose. In the menatime the government would bare the losses that the airline would inevitably make. Union roting and management incompetence would be endemic.

At least if Qantas was allowed to be a completely free agent it could settle into a proper airline and overcome union intransigence.

The problem with so many people in Australia is that they think they can sustain high wages when the market isn't there for the product their employer is making. They think that somehow the government can do everything and prop up their lives foir them.

Peter the Lawyer:

03 Mar 2014 2:43:37pm

Qantas has been hamstrung in that it is not free to seek capital from foreign sources. it has also had a bad IR climate in which to work. The unions have had too much clout in the system. This is particulalrly so since 2007 when a corrupt ALP gave the unions masses of power.

The management has not helped of course. It gave in too easily to union demands.

However, Qantas' domestic division has done very well since privatisation. It has been the international sector where the real problems have occurred.

As to Etihad and other government airlines, it is fine when you are in the middle of large routes, your government has lots of oil revenue and you treat your people like scum. Any government airline can achieve success if it has a bottomless pit of capital.

Aussie in UAE:

04 Mar 2014 6:28:59am

The rulers of Abu Dhabi (owners of Etihad) definitely do not treat their own people like scum. Emiratis are showered with riches by their government, in fact. Free healthcare, free education, free housing (in fact, widows in Abu Dhabi are given free investment properties to replace the lost income of their departed husbands), higher salaries than foreigners working in the same jobs, etc etc. The same oil wealth which allows the Al Nahyan family to provide an expansive welfare state for its people with no direct taxation also allows them to massively capitalise Etihad. Certainly this is an advantage Qantas doesn't have but let's not pretend that this is achieved through the systematic exploitation of the Emirati people - it is rather an effort to invest today's oil money into transforming their economy into one which can sustain these high standards of living. Rather like Dubai (also in the UAE) did with Emirates, which now directly or indirectly accounts for a huge proportion of both Dubai's GDP and the Dubai Government's revenue, exceeding Dubai's dwindling oil revenues many times over.

Etihad has the capital to pour into Virgin Australia's expansion. Emirates does not have the same capital to pour into Qantas - it is a money earner for Dubai not a money pit. Lifting the foreign ownership restriction on Qantas may not necessarily see the Middle East's oil money pour in - why would Etihad suddenly be interested in buying parts of Qantas when it is so heavily invested in Virgin Australia?

I would rather see shareholder value restored to Qantas by the current board and CEO of dunderheads joining the other soon to be jobless Qantas employees, and by Qantas bringing on-board a management team of the sort of calibre Emirates Airlines has - Emirates floods a market with seats but then it ACTUALLY FILLS THEM. I think Joyce and co forgot that the second part of that strategy is actually quite important.

As for the "masses of power" that a "corrupt ALP" gave the unions, that would be the masses of power which the unions had when Joyce grounded the airline in response to such dastardly industrial action as wearing red ties and telling customers how much they loved flying for Qantas and asking them to visit an online petition, destroying the airline's reputation by stranding customers all around the world? All that masses of power the unions had sure helped them force Joyce to back down right? Oh, that's right, no, the unions flat out lost, had to give up their industrial action and take management's offer. Hmm, somehow I don't think the current IR regime in Australia is anywhere near as much to blame for Qantas' problems as a CEO determined to flood the skies with empty seats.

If Qantas needs 5000 more jobs cut, fine, although the target strikes one as plucked out of the air. But such massive job losses should be part of a larger restructure which involves cutting empty seats and changing the

emess:

03 Mar 2014 1:20:13pm

Why should you see that Peter?

When Qantas was government owned before, it did not have rickety planes. Why would it now?

Bear the losses that it would make?

You do recall don't you that it was the former public servants in Qantas that saw off the always private enterprise Ansett? In fact, the fewer the older public service types that remain in Qantas, the worse it has performed.

Every time you get the urge to defend the management of Qantas, take a look at the share price since listing. Then lie down and wait for the urge to pass.

I am sure that if you are indeed a lawyer, you may have had to present some pretty dodgy cases in the best possible light. Me, I just look at the share price, and ignore the sophistry.

emess:

BenC:

03 Mar 2014 11:45:45am

I recall reading somewhere recently that only 15% of Australians fly Qantas (I can't recall whether this was in general or broken down domestically v international).

But despite all the rhetoric the choices Australian's make as consumer speak louder. If we wanted a domestic car industry we would have shown some interest in buying Australian made cars, we seem ambivalent about domestically tinned fruit (at least for the moment) but when it comes to travel we are in favour of a decent price and good service.

Qantas used to be competitively priced flying internationally, given a choice Australian consumers might come back to Qantas.

Industrial relations is not everything but the extraordinary performance of unions and the deals they demand is extraordinary - in the case of Toyota going to court to deny their own members a free vote on whether to accept a wages freeze to save jobs.

Anti-unionism for the sake of it won't get us far, but as Martin Fergus has said, unions refusing to be reasonable is getting in the way of what they profess to be pursuing - job security and thriving Australian industry.

Antonintassie:

03 Mar 2014 11:47:06am

As a frequent air traveller for both business and holidays who ditched Qantas /Jetstar a couple of years ago when Alan Joyce decided in his wisdom to ground all flight operations the real problem is service not cost.The bread and butter of most airlines are business travellers and all we want is hot coffee ,cold beer and the plane to be on time.I often fly REX a small regional airline with some of the best service in the industry .Yes it costs more but they have never stranded me or treated me with the contempt that Qantas /Jetstar used to display after taking my hard earned money.Alan Joyce has been a disaster for the Qantas brand .

emess:

Antonintassie:

03 Mar 2014 1:28:30pm

Poor industrial relations certainly has not helped the airlines cause not doubt about that ,and yes for the record the cost of labour in Australia in particular our hourly rate system outside 0900 to 1700 hrs is an issue that we need to address is jobs are to be saved and new ones generated

Skeptic:

03 Mar 2014 2:23:10pm

That was an unnecessary over-reaction by Joyce. He alone took the decision to kick the much-loved brand that is Qantas in the head and disrespect the travel plans of customers. Now we have seen the damage he caused by attempting to be a 'hard man'. Time for him to go - without his golden parachute!

emandm:

04 Mar 2014 8:41:58am

Yes you are correct in saying business people want 'the plane to be on time' but you forgot to mention that in the 12 weeks leading up to the shutdown the Unions had all but destroyed Qantas' on time performance. This was part of the slow bake of Qantas. One Union leader even went as far to publicly say not to book on Qantas over Christmas.

I was one of these affected travellers. It took me 12hrs to get from SYD to ADL, after being rerouted via MEL and waiting all day.

Qantas' forward bookings had collapsed, businesses had lost confidence. Alan Joyce and the board had only one way to end this damaging campaign and that was to force FWA to act to end the industrial campaign by shutting down the airline.

Brian:

03 Mar 2014 11:49:02am

It's outrageous that Joyce is still getting performance pay while running Qantas into the ground, upsetting staff and customers, giving up routes, buying planes for routes they're not approved for, and crying poor after all that. It's a tough business but it's hard to think of anything he's done right.

Da Enigma:

03 Mar 2014 1:06:42pm

I don't blame Joyce, I blame the board. Where were they when they appointed Joyce over Borgetti? Where were they when in Dixon's era forgo the 777. Where were they to go ahead and loose money with jetstar asia (which has yet to provide any profit)?

The last one made sense, but they did not react when the market reacted with overcapacity and realise that they were better focussing on their main product.

The board needs to be accountable. A lot of spin here. Fundamentally QF is in a sound position, but it needs action in reducing its over supply of seats. Otherwise it will become the headlines that they are trying to make.

Timbo:

Da Enigma:

03 Mar 2014 1:02:12pm

Aer Lingus turned into a hybrid LCC to compete with Ryan Air. It is not a full service airline these days. It has some full servic eon long hauls but the short hauls are LCC models. They introduced this strategy to stay a float and Ironically having Ryan Air being a partial owner of it.

emess:

That argument would have more force if the Jetstar international division with their much cheaper workforce was making headway. Instead, it is floundering as badly as any other part of the show.

There is much more than supposed high wages going on here.

I suspect that high wages are used by management as an excuse for poor management decisions. Just the extra cost of fuel used in older planes dwarfs the extra wages. Whose responsibility is fleet selection and management?

John:

Jetstar is foundering because of a decision by QANTAS management that infuriated Singapore (the country and the airline) and provoked a fierce retaliation that Jetstar could not withstand.

Diplomatic and sensible negotiating and planning could have avoided that situation.

My family and I flew overseas with Jetstar twice last year. The unanimous decision? Never again.

My wife and I also flew to Adelaide last year. Our return flight, booked to leave at 9.30am never arrived because QANTAS diverted the plane and made no announcement and gave no information on the Departure Board. We were left stranded at the airport until 5.30pm, by which time we had missed connecting flights in Sydney and lost hotel bookings. The response of the QANTAS officer at the enquiry desk at Mascot when we complained? He shouted across the departure hall as we walked away "Well, you'd better fly Virgin in future". Our decision? Never again.

Peter the Lawyer:

03 Mar 2014 12:17:48pm

The problem might also be that Qantas should split its domestic from its international service. It is the latter that is really bleeding money. This is mainly because of Australia's position at the end of the route, and the fact that other airlines can do things cheaper, because of lower staff costs.

Da Enigma:

03 Mar 2014 12:59:14pm

Peter, the international service is bleeding and that is the symptom. The issue is the QF board failure to address its airline fleet mx in the 90s, poor response to the market tastes (i.e. travelling public expectations such as inflight entertainment) and investing in the Asian LCC expansion strategy which in itself was smart, but then did not retract it, when it has been bleeding the rest of the QF group.

The board and management need to be accountable for the position that QF are in today. Splitting up domestic and international will not fix this mess.

Reducing capacity and improving yield, have a product that the market wants (not the other way round) and ensure that the right fleet is in the air, will help more and be sustainable.

It would also help if the government gets rid of the Qantas Sale Act and Qantas remains subject to the foreign sales legalisation like the rest of the corporate world.

The other part, splitting is not going to do anything, unless it is sold, but would that be a smart long term strategy to sell your profitable arm??? If a corporate has to do that they may as well shut the door.

Da Enigma:

03 Mar 2014 1:08:54pm

Wow Graham, you must have missed the the recent union corruption story investiaged by the ABC and Fairfax. Or were you reading a NEWS Inc story at the time about Justin Bieber or listening to Alan Jones throwing another one in a chaff bag overboard? If so I can understand it why you dislike the ABC.

MJLC:

Mums and dads are wonderful things (I know, Barnaby never ceases telling me) - all of us either are one or know someone who is. Mums and dads are giant pandas without the fur and penchant for bamboo - but paradoxically just as black-and-white and unimaginatively cute.

A union is nothing more than a collective of mums and dads. What's not to like exactly?

I applaud the ABC for standing up for as many mums and dads as it can in any one hit. To use your example, the Murdoch press seems to think one 'mum and dad' outranks many mums and dads if that 'mum and dad' accords with their warped philosophies. It takes a public broadcaster to understand that majority does indeed rule, and that wherever the most mums and dads gather that's where you'll find what's right and wholesome and good.

black parrot:

custard:

03 Mar 2014 2:25:23pm

Graham H

The ABC is unable to look at any issue other than from the left.

On Friday after Qantas announced job losses, they spent the entire day interviewing union leaders, and it was not until the Drum TV program later in the day that the aviation expert outlaid the 3 big issues with Qantas including average wages double their rivals, poor work practices and a stupid carbon tax.

It will be interesting to see Aunties coverage of the RC into union corruption or will they avoid coverage and simply say that seeing "The Australian" has an abiding interest in the subject we'll them report it instead!

HPH:

03 Mar 2014 3:40:16pm

"The ABC is unable to look at any issue other than from the left."

Wrong Custard! ABC is here for every citizen. The ABC is the public messenger. It does not make a political decision about what to broadcast or publish. You are free to write an article "against Unions" and contribute to The Drum. Why don't you? ...why doesn't Andrew Bolt or Alan Jones? I would love to read an article by Andrew Bolt, on this site. It would add colour to our lives.:)

carbon-based lifeform:

03 Mar 2014 3:41:53pm

Poor old custard.Can't read properly, can you. You never seem to be able to read the ABC stories on union corruption when they appear on this site and on radio and TV.I'd love to criticise "the Australian", but I'd have to pay to go onto their site and I'd be completely censored.Of course, you can come here and write your vitriol for free and get it posted.Can't you see a little bit of hypocrisy or irony here?

Safudas:

03 Mar 2014 12:39:42pm

I'd gladly pay a higher price for a plane ticket if I didn't have to jump the hoops and hidden costs from seat reservations to luggage check-ins.Time to attract customers back with good old-fashioned service instead of competing to see who can provide the cheapest nominal airfare with the least amount of assistance.

True Blue Ozzie:

03 Mar 2014 12:47:44pm

Sack Alan Joyce first !!!!!!! He's made some huge blunders, most memorable shuting Qantas down during the strike of some Qantas workers. His actions destroyed Qantas's good name and hurt it's paying passenger's who were loyal to the bone.

My last two plane flights were with Qantas, and ill never use them again. Firstly we had to walk a long distance on the tarmac to get to the plane, and the same deal getting off, and no indercation when booking online that the frail or impared like my self would be better off booking the wheel chair service on these flights. The plane arrived late and departed late from 30 minutes to an hour! We were cramed in like sheep off to market and the air quality was -10, the engine fumes were in the cabin along with every human smell possible and the air conditioning wasn't cutting it either. By the time we landed I was on the verge of throwing up !!!!! My trip was from Townsville to Rockhampton a short leg to say the least, and more shockingly this plane fly's from Brisbane to Cairns daily.

No I'm Virgin all the way, Qantas has really got to get of Joyce and get back to the basics that once built the company or its death is near.

RICHARD:

03 Mar 2014 1:08:38pm

GRAHAM -WE CAN!!!!!!!!!!!. BEFORE GFC AND ALLAN JOYCE QANTAS MADE PROFIT. ONE YEAR THEY MADE A BILLION DOLLARS PROFIT. AND AT A TIME OF "BIG WAGES AND COSTS"!!!. AT A TIME WHEN CEO WAS ONLY PAID A FRACTION OF JOYCES SALARY!.SO WHY NOT AGAIN?. WHATS HAPENED SINCE......MISMANAGEMENT AS THE ARTICLE STATES, OR DIDNT YOU READ IT???.

Graeme Harrison:

03 Mar 2014 1:15:04pm

A national carrier is different to cars or other manufacturing industries. We may well need a national carrier to divert for evacuations, such as Hurricane Tracy in Darwin, or disasters in our Pacific neighbours. But more importantly, there is absolutely no point in having any Defence budget if we don't call a major airline as our own. The RAAF can't move people, like an airline can. In any dispute, we would not want to be asking Singapore, Dubai or other governments for aviation assistance.

I have no conceptual problem with the government purchasing 'convertible debt' to assist the forward capitalisation of Qantas. The logic is that Qantas made significant profits in recent years, and may well do so in the future. Virgin already has its major deep-pocket backers... but if it struck trouble, it too could ask the Australian government to assist with convertible debt.

The reason for convertible new debt is to avoid issuing a guarantee for existing debt, which was sold (or is now sold) cheap, on the basis of no government indemnity, so one should not give such a gift now to prior purchasers of such debt. The reason for its conversion right is to allow, in the event that it is not repaid, for the government to get a bonus rate of equity (say 20%) for having stumped up, after the bonds went 'junk' status. This means that the government could have its own experts appointed in the event of default.

And the price to be paid by Joyce and the present Qantas board is that they all step down over the coming year. They must fall on their swords for the strategic plan they have followed to the carrier's near-demise.

The problem with only tinkering with the Qantas Sale Act is that it only transfers ownership/control to some foreign government. It is not time to 'give up' - only to recapitalise and punish the current board.

Bush Dweller:

KevinS:

03 Mar 2014 1:28:12pm

The Howard Government set Qantas up to fail by its 49% rule. In doing this, the Howard government defied economists advice. It also ensured the fail with its saddling of Telstra with infrastructure upgrades and maintenance whilst refusing a pass on or burden to be shared by other telcos granted access in Australia. Suitably compliant boards and CEO's for both entities paid dividends to shareholders, often well above market realities whilst surviving only on short lived cost reductions by massive redundancies of employees/ cutting service quality and delivery and outsourcing irregardless of quality of outsourced services. Both board and management teams delivered the goods that saw the premium reputation of both organisations to be downgraded to junk, all the while approving their own remunerations, bonuses and sittings fees and costs reimbursement increases.

Eskimo:

KevinS:

03 Mar 2014 3:04:59pm

Don't dispute the Keating reform which was done during the period of wordwide protectionism, subsidy and tariffs. But look at the tinkering to policy regarding Qantas during the Howard years. The Howard government rejected numerous informal submissions and requests from Qantas regarding its 49% lock as the aviation industry worldwide was transitioning, repositioning and seeing very cash rich nations buying stakes and investing in critical international routes and markets. Instead some crucial and experienced board members left Qantas along with experienced and highly effective but fed up senior management.I repeat policy regarding Qantas and Telstra were set set to totally divest Australian national interest/ investment by destroying the reputations of both organisations. You have seen how this played out.The regime and strategy applied is reminiscent of corporate takeovers where the sole intention is to strip the assets of the takeover target and send the profits offshore, all the while leaving the little shareholders with a worthless investment.

Machiavelli's Cat:

DaveS:

03 Mar 2014 1:28:28pm

Love ya work Ian.Do you think Mr Joyce thought that WE the public wouldn't allow Qantas to fail , so he could carry on mismanaging the airline?I do. Mr Joyce should fall on his sword , or be sacked by the board. Its pretty clear he has run the airline down. Take his actions , which included grounding the airline due to union issues or 'death by a thousand cuts' as he labelled it , and it seems clear he has very little grip on reality let alone a grip on running a competitive airline. The carbon tax is a case in point where Qantas charges more to cover it , then complains it holds them back when its on all airlines. Then again our current Govt suffer from Joyce Syndrome too, its everyone elses fault but mine/ours....

Skeptic:

Vincent Johns:

03 Mar 2014 2:33:34pm

I don't know what others feel, but I definitely wouldn't feel very safe now, flying with an airline that is engaged in a bitter internal war between its leadership team, who are supposed to inspire their workers, and its workers, who are paid to ensure customer safety. As long as Joyce remains in charge, he will never be forgiven by his workers for what he's done. He sets a bad leadership example that seems to be all too common in workplaces these days. The message that only the people at the top matter, and everyone else are just exploitable, expendable cattle. From here on in, he may be able to force their compliance, but he will never again inspire their enthusiasm to do their best at what they do.

Poisonous Mushroom:

If the shareholders of Qantas cannot control their board and managing director that is their problem..They signed on to use the skill of the board and managing director to make them wealthier.

'Tis a pity the Qantas board and managing director have reduced their wealth. But that is between the shareholders, the board and the managing director. It should have nothing to do with taxpayers.

Taxpayers have the right to decide how to dispose of their discretionary income and if Qantas does not get the share of it that Qantas shareholders want, so be it.

The sooner Qantas sinks like Ansett was left to sink the sooner the incompetent managing director and board will be put out of their misery.

And if Australians believe Abbott no sacked worker has anything to fear, Abbott has created or is creating 5 million additional and better jobs for the liberated of Holden, Toyota, SPC, Qantas and all who have or will lose their jobs on his watch.

If you don't believe Abbott, Australia will have the recession it need not have.

Gone to the races:

03 Mar 2014 3:13:39pm

If you're running a business in the 21st century and you need to get on a plane for a company meeting then you're living in the previous century. Internet conferencing is dramatically cheaper. Airlines have been exploiting the business rort for decades. The game is up. Only tourists and those finding a new country need to fly these days. QANTAS aka Quaint, Antiquated, Non-profit, Token, Air, Service.

Sammy:

Joyce, another 457 visa disaster for this country. Send him back to the small country from which he came like all the other 457 visa holders that are now taking away local jobs for Australians.

Australia is just the whipping boy for international corporations that have no loyalty to the country in which they operate neither do they care if the work is done elsewhere. All supported somehow by our successive governments. Go figure! I know from first hand experience.

aGuy:

Qantas is nothing special. Lets rip up the Qantas act and treat Qantas as it is. A Company. A Company just like Virgin, just like Ansett was, just like Murray's (only difference is bus to plane).

Its all the same. None deserve a bail out as there is intense competition letting consumers choose what they want. The only regulations I would like to see would apply to all companies. Safety and clear pricing.

Tropicalcat:

03 Mar 2014 4:29:50pm

Anyone who knew Borghetti knew QF got it wrong in putting on Joyce as CEO. Sadly he has proved people right about the job being too big for him. Running a cost focused discount airline with a big brother behind you when the market was screaming for low fares wasn't that hard. Running QF always was going to require a set of skills in a different league. The fleet legacy he inherited was also a handgrenade waiting to explode. The 380's were a vanity purchase and have proven hard to run at decent loadings since purchase. Personally I think QF will continue to burn money at a rate of knots for the next few years. The problem for shareholders is that it has over $3b in cash and lots of realizable assets so it's going to be ugly for quite some time unless QF comes up with a new game plan. The 65% market share is a slogan not a business plan and international is in terminal decline. When I think of quality now I think of the Gulf carriers or even ANZ, certainly not QF. The paradox is that those old grandfathered and protected staff, as well as costing an arm and a leg are also those that are eroding the service quality reputation. Sad to see this slow decline with no end in sight.

Breach of peace:

03 Mar 2014 4:46:47pm

The world's top airlines show that Qantas was number 15 in ranking world-wide in 2012 and in 2013 moved up to the number 10 position according to World Airline Awards. http://www.worldairlineawards.com/awards_2013/airline2013_top20.htm

When we look at the World Airport Awards for 100 airports for 2012 we see Brisbane is rated number 21, Melbourne is rated number 29 and Sydney is rated number 31. The figures for 2013 are Brisbane has dropped to 34, Melbourne has dropped to 43 and Sydney has risen to 20.

If we look at the Airline ratings for safety Qantas is at the top of the list out of 448 monitored airlines.

They wanted privatisation and we have it like it or not. No government handouts or corporate welfare from the Australian taxpayer should be forth coming. The taxpayer has been hit in so many areas for the sole benefit of corporations and not for the benefit of ordinary Australians. I suggest people read the book 'The Men Who Killed Qantas'.http://www.randomhouse.com.au/books/matthew-benns/the-men-who-killed-qantas-9781742750378.aspx

JMJ:

03 Mar 2014 6:23:47pm

Ian, my understanding is that the LNP need to get their facts right for the carbon tax is insignificant in comparison to Qantas management failings ie making a significant loss of A$262 in Qantas's international division with the alliance with Gulf carrier Emirates.

Aussie in UAE:

04 Mar 2014 6:45:11am

There's a reason Emirates flies 777s on long haul routes which can't sustain A380s. They're more fuel efficient than Qantas' 747s. Emirates fills at least two 777 flights a day on a route before they expand to an A380 (witness the Brisbane to Dubai route).

Qantas either flies uneconomical 747s or half-empty A380s. Management bought the wrong aircraft. No wonder Qantas was happy for Emirates to take over so many routes.

As an Aussie expat in the UAE I might be biased because the Qantas/Emirates deal is terrific for me, but I'd sooner see Qantas sell JetStar Asia and replace some old 747s with more fuel efficient modern aircraft like the 777 than drop its alliance with Emirates.

Andrew:

03 Mar 2014 8:11:15pm

I imagine that given the legislative shackles so to speak are seemingly about to be lifted from the wrists and ankles of QANTAS that part of the legislation will also include provisions for the name of the airline to be immediately changed and the logo as well. That would I imagine be a logical step as the airline would cease to exist as a flag carrier and would lose all identity as an airline representative of this country. No doubt other factors have been at play but the blame for the current state of the company rest squarely with the current CEO and the board of directors for their apparent utter incompetence including a disaster of a misadventure in the Asian market.

Common sense Charlie:

The environment faced by Qantas and Virgin mirrors the circumstance faced by car rental companies in the 1970's and 1980's when Bob Ansett brought the car rental industry in Australia to its knees.

The answer is rather simple. After losing as much money as they can, the stakeholders become rational operators and nurse their balance sheets back to health.

Qantas needs to put their fleet in order, operate the correct type and number of aircraft, and offer seats for sale at a price that exceeds their costs. Economics 101 really, but apparently beyond Alan Joyce and the board he represents.

Ron:

03 Mar 2014 10:37:56pm

When a company is not doing well, the first thing is to cut cost. The easiest cost-cutting exercise is to reduce labour, the most expandable and cost-intensive element in running a company. The fact that it is labour that made the company what it was, is often ignored. Qantas has been out-sourcing its maintenance overseas and reducing the Australian labour content in the last few years. It has not improved the viability of the company. Now Joyce and the board wants to sack more Aussie workers and sell shares to foreigners. Why don't the politicians from both sides have some guts and blame Joyce and the board for failing. Put the CEO and the Board on a remuneration based on performance. Sacking some of these parasites can save many lowly paid workers. While Abbott is thinking of selling Qantas shares to foreigners, why stop at Qantas? Sell the Parliament, out-source the politicians to the likes of Singaporeans who are cheaper and will do a better job. God bless Australia.

jasper:

04 Mar 2014 12:33:21am

The biggest joke of all is that simply allowing Qantas to be foreign owned will be some panacea for their ills.The reality is that any share ownership change results in ZERO change to the funding base for Qantas.The capitalisation of a company is NOT changed by one cent when shares change hands. A company can only sell a share ONCE, after that it is only either a profit or loss for the seller of the share as they abandon the company.Qantas, like ANY company, can raise further capital by selling more shares, a move that would likely see Super funds easily take up extra Australian shareholdings.

Briano:

Quiet Investigator:

04 Mar 2014 5:06:01am

There is another aspect of this mess which bears consideration. Loyalties and legitimate concerns with the CEO and Board aside, an analysis of aviation safety shows a correlation with the financial stability of an airline. Despite regulatory controls, airlines with cash problems cut as many corners as they can. A look at some of the airlines with the worst safety records indicates that problems start at the top. Qantas has had an exemplary safety record but has shown disturbing signs of publicised in-flight, operational and maintenance problems. The in-built safety margin has prevented a disaster but this buffer is fraying at the edges. I will avoid Qantas on potential safety issues for as long as they are in a financial tailspin.

Zany:

04 Mar 2014 8:42:30am

Workers love to go to work at companies that are efficient and have a bright future and competent management they can relate to. Qantas is in the unfortunate position where it can no longer afford its workforce costs. Getting this workforce offside was merely a ruse to obtain as many resignations as possible before major restructures were announced. Tony Abbot is faced with a major problem and he will be judged on the outcome of his choices. The 49 rule is a long term fix. What is he going to do in the short term and who will buy in? If a Chinese airline buys in what will he do allow it or not . Is this another graincorp in the making? Joe Hockey and Tony Abbot don't seem to be able to get a grasp on this situation and the litany of blunders continues.

mick:

04 Mar 2014 8:51:27am

joyce needed to be sacked years agolibs and joyce just want to sell up and spend money we cant compete with other airlines because there govts help fund themwhy not give it to Chinese like are with everything elsethe sooner we get rid of abbutts and hockey the better.god help us poor aussies

allan:

04 Mar 2014 9:27:02am

Pay a multi million dollar package to some guy and you expect dramatic results. Changes have to be made and if all the good ideas have already been used then don't be surprised when the new direction is not good. Much of what happens is due to management so when it goes bad who should cop the blame? Sadly the first skill that managers aquire is to deflect the blame else where. That is why they get all the money. If money determines everything and as your perception of the airline is determined more by the ticket takers and aircrew, the idea of paying them more seems to have merit. If none of the executive turned up for the day no one would notice would they?

Oaktree:

04 Mar 2014 9:31:40am

Quantas being opened to foreign ownership is an absolute outrage. Our national carrier and resource in times of international unrest, as we are currently seeing in Syria and the Crimea, should never leave our hands!

This is an absolute disgrace. Thousands more jobs lost. Hockey now finding that scrapping the carbon tax is not the panacea for all ills but just an argument phrased to appease this government in a submission.

I gather this measure did not run smoothly through the Cabinet and I, for one, will be writing some emails to MPs today.

Slammer:

A seat on a plane. Yes, at the most simplistic level. But that is what every Airline provides. (except some excellent PNG flights where you do get an aisle or standing "seat".)

Isn't it also selling a safety record ( which they are stuffing up slowly but inevitably). An "Aussie icon" experience.Greater reliability.Good terminals and facilities.Good routes.

NAH, they've dumbed themselves down to join the rest. Cheap seats, a shove'em on and shove off attitude that you get with budgets. Dodgy ticketing purchases, bought the seat now buy legroom, window,(my favourite) pay extra to be a family and sit together...

We're sick and tired of cancelled flights. No returns (didn't you read the fine print) policy, Buy your water, buy your blanket. Staff to busy to acknowledge you as they hand you a boarding pass because they're thinking of the 300m sprint they are about to undertake to collect your boarding pass at the gate.

CHris:

04 Mar 2014 10:06:08am

QANTAS have failed in the most basic of business tasks, protecting the shareholder. Alan Joyce is using the company as his own private slush fund: it was his decision to cost the business over $200m in lost income and goodwill from the worker lockouts; his decision to embark on the madness of over-capacitising (sic) the market. He has shredded the dignity of QANTAS and in doing so established himself as public enemy no.1 in the Australian people's minds.

To keep Alan Joyce as the CEO of QANTAS will simply hurt the brand and shareholders further. A poor man's Michael O'Leary with no class or entrepreneurial nouse to boot. AJ seems to be deliberately running QANTAS into the ground to force the hand of the government and establish false alibies for eroding workforce power and entitlements. He is doing this at the expense of the business and shareholders.Sack the man, keep the company.

As for the issue of cost blow-outs and competition, QANTAS do have a number of structural issues, mainly in their fleet management and OTG costs. The maintenance issue is problematic but safety should of course be a number one priority. Unions, for their part, should be mindful that inflexibility in working arrangements (not necessarily labour costs) will only serve to hurt the company more. It will take all parties to work together to restore QANTAS to a viable enterprise.

Briano:

04 Mar 2014 10:40:43am

So how come Qantas wasn't in trouble and whinging about the unions and their demands when they had a virtual monopoly and were charging like wounded bulls with exorbitant prices?The reason would be that they were making so much profit that they were happily giving the unions what they wanted. Then, when things got a bit tough and Virgin came along, Qantas senior management decided to sacrifice some of that profit margin in an attempt to chase off the upstart so that they could return to their fat and indolent existence.They now find that they are in a bind financially because of that strategy, and complain that the workforce costs are a major factor in their dilemma - well who created those workforce costs? Oh! That's right, Qantas did that when they were a virtual monopoly! What Qantas forgot about in their cunning plan to accept a smaller profit margin, was that they still had the workforce costs which they had negotiated in the good times and couldn't reduce that arbitrarily. Their plan may have worked but they underestimated Virgin's resolve and now find themselves hoist' by their own petard.

mal g:

Andrew:

04 Mar 2014 2:06:25pm

Ian's analysis ignores the central problem for QANTAS - it's cost structure i.e its labour costs are higher than competitors such as Virgin and enforced by the restrictive QANTAS Sale Act. QANTAS should be free to source whatever funding it requires and to restructure the business as it sees fit- just as its competitors can, and do. People forget that this country has largely been built with private capital from overseas. It has funded the wealth we know today, and will fund the capital needs of Australian businesses for year to come. Relax Australia and let QANTAS become a world leader again.

Michael:

04 Mar 2014 2:44:54pm

QANTAS created Jetstar..... then tried to price match them ...... Jetstar became a poor copy of Virgin ...... and remember when you had to run to get a seat ....... then QANTAS then pushed their passengers onto Jetstar by rescheduling flights (forgive me, but there are more links than Sydney to Melbourne out there).....

Lets face it, service on both QANTAS and Jetstar is poor compared to Virgin (domestically) and Singapore (internationally). LAX A380 flight I was on ran out of bottled water..... and ever been in a Virgin Lounge recently ?

Alan Joyce is woeful CEO, but he is just another in a long line of failures (Strong... Dixon...)Sadly, he'll get a lovely golden handshake and retire before all of us.